Last week (June 29–July 3) the KOSPI index swung sharply. As concerns spread that the semiconductor boom led by artificial intelligence (AI) could slow, the KOSPI, which had held the 8,400 level, slid to as low as the 7,300 level. Buying then came in, the 8,000 level was regained, and weekly transaction closed.
This week (July 6–10) investor focus is expected to center on whether AI demand remains solid. In the securities industry, there is a view that Samsung Electronics' second-quarter earnings announcement on July 7 and SK hynix's American depositary receipt (ADR) listing on July 10 could be the starting signal for a market rebound.
◇ Fear of "AI demand slowdown" shakes semiconductor investor sentiment
Last week the KOSPI plunged as negative news on semiconductors poured in. News that OpenAI will delay its initial public offering (IPO) to next year raised doubts about the continuity of AI investment, and reports that Apple is considering raising product prices due to the expense burden from rising chip prices sparked concerns about a demand slowdown. On top of that, news that Meta will enter a cloud business lending idle AI computing resources added to worries that semiconductor demand may have peaked.
Concerns about expanded supply also dampened investor sentiment. After the government announced a "mega project" to build a 800 trillion won semiconductor plant in the southwest region, some interpreted that the supplier's market advantage could weaken faster than expected. Michael Burry, who predicted the global financial crisis, warned that "the massive expenditure announced in Korea is the 'beginning of the end,'" adding, "It is now only a matter of time before the bubble bursts."
Foreign selling was particularly strong. Foreign investors were net sellers of 19.43 trillion won in the Korea Exchange over the week. Analysts said global funds moved to rebalance (adjust weights) after Korea's market surged in the first half. The soaring exchange rate also sped foreign capital outflows. The won-dollar rate moved in the 1,540–1,550 won range last week.
Still, when the market judged semiconductor earnings to be solid and the segment to be in a short-term oversold zone, stocks surged on the 3rd. Lee Jae-won of Yuanta Securities Korea said, "Issues that could actually damage memory fundamentals—such as hyperscalers' capital expenditures (CAPEX) being cut, reductions in long-term supply contracts for high bandwidth memory (HBM), a slowdown in server DRAM prices, and fewer orders for next-generation graphics processing units (GPUs)—have not been confirmed," adding, "This pullback is valuation derating driven by noise rather than damage to fundamentals."
Semiconductor-related indicators were also favorable. Korea's June semiconductor exports jumped 199.5% year over year to $44.8 billion, leading overall export growth. However, a slight month-over-month decline in export unit prices for DRAM and SSDs is cited as a variable that needs to be checked going forward.
◇ Samsung Electronics Q2 earnings; SK hynix ADR "turning point"
The full-fledged second-quarter pre-earnings season begins this week. The biggest focus is Samsung Electronics' second-quarter results to be announced on July 7. Investors are watching whether the results can beat the operating profit consensus of 84 trillion won presented by securities firms. This figure reflects incentive expense in the expectations raised over the past three months (85 trillion 600 billion won).
Lee Kyung-min, a researcher at Daishin Securities, said, "If second-quarter results are better than expected, shares are expected to rise," adding, "Even if results are weaker than expected, unless they are shock-level, the clearing of uncertainty and undervaluation appeal should flip the mood."
SK hynix's U.S. ADR listing scheduled for July 10 is also cited as an event that could spur semiconductor investor sentiment. Lee Jae-won of Yuanta Securities Korea said, "If SK hynix lists on Nasdaq, there is a possibility its lower valuation relative to Micron will be reassessed," adding, "Passive fund inflows are also expected."
Macroeconomic variables also warrant attention. The U.S. June ISM services index, to be released on July 6, is a gauge of price pressure. The minutes of the June Federal Open Market Committee (FOMC), to be released on July 8, are expected to show how the Federal Reserve (Fed) is reflecting geopolitical risks in the Middle East and inflation pressures in its monetary policy.